Watchdog panel denies order to ban major U.S. shortseller

CALGARY/TORONTO The Alberta Securities Commission has dismissed an application to temporarily ban prominent U.S. shortseller Marc Cohodes from trading in Badger Daylighting Ltd. as a result of social media posts he made about thefirm.

Commission staff sought the ban last week but have so far provided “insufficient grounds” for a panel of commissioners to take any action against Cohodes, ASC panel vice-chair Thomas Cotter said in a decision Wednesday. A written ruling elaborating on the reasons for dismissing the application, which also sought to prohibit Cohodes from making any public statements about Badger that he “knows or reasonably ought to know are misleading or untrue,” will follow.

“Mr. Cohodes is pleased with the decision of the ASC to dismiss the application against him,” his lawyer Mark Wiffen said in an emailed statement, adding his client “continues to believe that the efficient markets are best served by the protection of free speech and open debate ...”

The ASC is conducting an investigation into Cohodes and his behaviour with regard to Badger, a Calgary-based hydrovac services company in which Cohodes holds a short position. The regulator is particularly concerned about a Twitter post on June 27 that allegedly misrepresented a picture of a Badger truck as support for his allegation that the firm is engaged in illegal toxic dumping.

At a hearing Wednesday, ASC counsel Don Young said the interim order was being sought as a “protective measure” to prevent Cohodes from trading in Badger securities or making any further misleading statements about the firm before what will likely be a full hearing at a later date.

Young said Cohodes is a highprofile trader and has 25,000 Twitter followers, and “common sense” indicates that misleading statements made by him online would negatively affect Badger’s market price.

However, lawyer Andrew Wilson argued his client’s behaviour should be debated at a formal hearing, after a complete investigation, and not hastily dealt with. He pointed out that since Cohodes began his online campaign against the company in May 2017, its share price has actually risen by 20 per cent.